1. Vivien Foster & Cecilia Briceño-Garmendia World Bank

2. Africa Infrastructure Country Diagnostic: a multi-stakeholder effort

3. Key Message #1 Water spending needs are US$32 billion a year, (of which US$22 billion for WSS MDGs)

4. An illustrative water investment agenda for the next decade nWater supply – meet MDG target by 2015 (and rehabilitate existing systems to ensure sustainability) nSanitation – meet MDG target by 2015 (and rehabilitate existing systems to ensure sustainability) nIrrigation – develop all viable large and small scale irrigation opportunities amounting to 7 million has. nWater resources – develop all water storage associated with feasible hydro-projects (of at least 35 GW)

5. Overall price tag of US$32 billion annually – mainly MDG related US$ billion paInvestmentO&MTOTAL RehabilitateExpandTotal WSS MDG Targets 22.2* Water 4.26.911.15.516.6 Sanitation 2.81.34.11.55.6 Water Resources 10.1 Irrigation 0.62.12.70.63.3 Storage -6.8 - TOTAL7.617.124.57.632.3 * Assuming medium level of service

6. How investment needs here are different from previous estimated? nAnalysis expands existing methodologies: nIncludes non-standardized infrastructure costs, reflecting country-specific patterns of demography and geography and differences in levels of technological innovation and local market development nAssumes that the relative prevalence of water and sanitation supply modalities will remain constant from 2006 to 2015 nEstimates rehabilitation needs based on the specific status of assets and rehabilitation backlog of each country nAllows running sensitivity analysis on different parameters (quality of service, costs, timeframe) and exploring affordability issues

7. 18 countries (many fragile) would need to spend more than 5 percent of GDP to achieve MDG in WSS Assuming medium level of service

8. Key Message #2 First step towards achieving water security is to develop priority hydro-power schemes

9. Achieving full water security is an unquantified challenge nAfricas hydrological legacy is particularly challenging nHigh rainfall variability within and across years n60 international rivers nExtreme hydrological events (droughts/floods) have major macro-economic impacts nEthiopia, Kenya, Mozambique all losing 1% GDP annually nAfricas per capita water storage capacity is 200m 3 versus at least 1,000m 3 in other developing regions nCost of increasing storage by these multiples would be prohibitive in economic terms nRaising Ethiopias storage to RSA levels would cost US$35bn,

10. Major development of hydro-power over next decade particularly with regional trade Power generation capacity (MW) Water storage Trade stagnation Trade Expansion millions m 3 m 3 per-capita Central Africa 3,567 4,847 30,383 0.32 Eastern Africa 4,170 10,675 65,444 0.25 Southern Africa 10,797 16,764 21,121 0.11 Western Africa 14,845 17,620 18,667 0.08 Total 33,37949,546 135,615 0.19* * Simple average

11. Key Message #3 Potential to viably double existing irrigated area but crucially sensitive to costs

12. About 7 million hectares of new irrigation potential – predominantly small scale IRR threshold of 12% Agricultural area (millions hectares) Investment (US$billion pa) Internal Rate of Return (%) Small scale schemes 5.41.826 Large scale schemes 1.40.317 Total new schemes 6.82.125 Rehabilitating existing schemes 1.70.6Na. Total 8.52.725 Irrigation is mostly viable only for cash or high value food crops (horticulture) with revenues >US$2,000/ha/yr

13. Small scale gives much higher returns, but potential area much more sensitive to cost

14. Spatial extension of large and small scale irrigation potential identified

15. Irrigation potential concentrated in some 15 countries, most notably Nigeria Note: Graphs show all countries with more than 50,000 hectares of potential for large or small scale irrigation

16. Key Message #4 Access stagnant and inequitable, main action at lower end of ladder

17. Access trends stagnant at best, fastest growth takes place on lower rungs of ladder

18. Second best solutions as inequitably distributed as first best solutions

19. Sanitation presents a number of different typologies that drive policy choice Septic tank Improved latrine Unimproved latrine Open defecation Prevalence of open defecation Septic tank Improved latrine Unimproved latrine Open defecation Prevalence of unimproved latrine Septic tank Improved latrine Unimproved latrine Open defecation Prevalence of improved latrine Septic tank Improved latrine Unimproved latrine Open defecation Bimodal pattern

20. Key Message #5 Existing spending on MDG targets at US$7.6 billion a year more than previously thought

21. Spending of US$7.6 billion annually US$billion pa InvestmentO&M TOTAL Public Sector ODA Non- OECD financi ers Private sector House hold self- finance Total Public Sector Middle income0.20.1000.30.52.22.6 Resource rich0.70.20.100.81.60.21.7 Low income - Non-Fragile 0.30.80.100.81.50.31.8 Low income - Fragile 00.1000.3 0.10.5 TOTAL1.11.20.202.14.63.17.6

22. 16 countries are already spending more than 2 percent of GDP

23. LICs heavily dependent on donor capital, households play key role in sanitation

24. Key Message #6 There is a funding gap of US$11.4 billion a year for WSS, even after the US$2.9 billion efficiency gap is recouped

25. What do we mean by an efficiency gap? nWater tariffs recover less than 2/3 of the full capital cost of the service (60%) nOperating inefficiency of utilities creates a drag nNon-revenue water of 34% versus best practice 10% nRevenue collection of 72% versus best practice 100% nLow number of connections per employees (259 connections/employee on average) nLow public sector budget execution ratios lead to unspent resources (US$0.2 bn)

26. There is a funding gap of $11.4 billion a year – even after recouping inefficiencies US$billion pa LIC – Fragile LIC - Non- Fragile Resource Rich MICSSA Needs (4.8)(7.6)(6.1)(3.6)(21.9) Spending 0.41.81.72.37.6 Efficiency Gap 0.40.60.71.32.9 Capital Execution 0.0 0.20.00.2 Operational Inefficiencies 0.10.20.3 1.0 Cost Recovery 0.20.30.21.01.8 Financing Gap (3.9)(5.2)(3.7)(0.0)(11.4)

27. A number of countries have an efficiency gap in excess of 0.5 percent of GDP

28. A number of countries have a funding gap in excess of 2 percent of GDP

29. Key Message #7 Cost recovery could be improved without major detrimental poverty impacts

30. On average water tariffs cover less than two thirds of full capital costs of US$1.00/m 3

31. Piped water subsidies are highly regressive in their distributional incidence PROGRESSIVE

32. Cost recovery tariffs would be affordable to MICs and LIC populations with access

33. LOWER BOUND LOWER BOUND – subsistence consumption defined as six cubic meters at $1 each or 10 cubic meters at $0.60 each

34. Cost recovery tariffs would be affordable to MICs and LIC populations with access LOWER BOUND

35. Cost recovery tariffs would be affordable to MICs and LIC populations with access UPPER BOUNDLOWER BOUND UPPER BOUND – subsistence consumption defined as ten cubic meters at $1 each (full capital cost recovery)

36. Cost recovery tariffs would be affordable to MICs and LIC populations with access UPPER BOUNDLOWER BOUND

37. Key Message #8 Improving efficiency has a tangible impact in sector performance

38. Detrimental impact of utility inefficiency on service expansion and quality

39. Mixed evidence on impact of institutional reforms on improving efficiency

40. Key Message #9 Considerable cost savings could be made by adopting alternative technologies

41. Adopting lower standards can reduce costs of meeting MDG by 6 percent of GDP for fragile states

42. Key Message #10 Some countries may simply need more time to reach MDG targets

43. Time needed to meet MDG targets with todays budget envelopes Years taken to reach MDG target (counting from 2006) MICRRLICNFLICF Existing spending only 10>30 Existing spending plus efficiency gains <1020 >30